Anonymous
Anonymous asked in Business & FinanceInvesting · 9 years ago

Calculate default risk premium?

Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds?

5 Answers

Relevance
  • J
    Lv 4
    9 years ago
    Favorite Answer

    r (corp)= rf (risk free rate, in this case 5.30%) + lp + drp+ mrp,

    so

    6.75= 5.30 + 0.25 + drp + 1.15

    solve for drp= 0.05%

    remember that the maturity risk premium is already built into the T-bond rate as quoted.

  • cung
    Lv 4
    3 years ago

    Default Risk Premium

  • winget
    Lv 4
    3 years ago

    Risk Premium Formula

  • 4 years ago

    This Site Might Help You.

    RE:

    Calculate default risk premium?

    Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk...

    Source(s): calculate default risk premium: https://shortly.im/7f8RK
  • How do you think about the answers? You can sign in to vote the answer.
  • 4 years ago

    what if there is no mrp given ...then how would you solve it..

Still have questions? Get your answers by asking now.